In a scenario where a big pharmaceutical (BP) company has a drug that, when used in combination with a small company's drug, produces significantly improved results compared to using the BP drug alone, there are several reasons why the BP company might be incentivized to pay upfront for the collaboration:
Access to Valuable Asset: The small company's drug is a critical component in achieving the dramatic improvements seen in combination. The BP company recognizes that access to this drug is essential for enhancing their own product's efficacy or market potential.
Competitive Advantage: The dramatic improvements seen in combination could provide the BP company with a significant competitive advantage in the market. By paying upfront for the collaboration, they secure their position as a leader in the field and gain a head start over competitors.
Market Potential: The improved results from the combination trial could lead to a larger market share and increased revenue for the BP company. Paying upfront to secure the collaboration could be seen as a strategic investment to tap into this potential.
Intellectual Property: If the small company's drug has unique intellectual property or proprietary technology, the BP company might pay upfront for the rights to use that technology exclusively or in combination with their own drug.
Regulatory Advantage: The combination trial results might provide a stronger case for regulatory approvals or a more favorable position during the regulatory process. This can speed up time to market and increase the chances of successful commercialization.
Risk Mitigation: Paying upfront could provide the BP company with greater control over the collaboration and mitigate risks associated with the small company potentially partnering with competitors.
Strategic Positioning: By paying upfront and forming a collaboration, the BP company demonstrates its commitment to the combination therapy's success, which can enhance its reputation and relationships within the industry.
